Friday, June 28, 2013

Is a gold bottom imminent?

On Thursday the bearish headlines started flashing across the
news wire: gold breaks below $1,200. I
cautioned in the previous report that gold would likely experience spillover
weakness in the coming days after breaking down from a descending triangle
chart formation. While the minimum
downside target for this pattern projected to $1,250, breakdowns that are accompanied
by heavy institutional bearish sentiment – like the kind gold experienced – are
apt to overshoot the downside target.

I have no price target for a bottom since I don’t believe in
“catching the falling dagger.” I’ll
leave that to the bottom pickers. For
now I recommend that we simply wait for gold to exhaust its selling pressure,
which it likely will in the next few days, then wait for the inevitable
reversal before evaluating the near-term technical prospects for a tradable
rally. The good news (besides the latest
Goldman Sachs report) is that the important 10-month price oscillator for gold
should turn up on July 1, which will give us the first technical indication
that a worthwhile bottom is in the making.